Spending watchdog confirms Rover investigation

The National Audit Office, the spending watchdog, yesterday confirmed it is investigating the Government's handling of the collapse of car maker MG Rover in April.

The news came as the Conservative Party called for the NAO to check whether "taxpayers' money was used for political purposes during the general election campaign". Yesterday, the NAO said: "The report includes examining the part played by the Department of Trade & Industry and other public bodies in helping to support the company in the period leading up to administration.

"It also looks at how the department and public bodies initially responded to the administration, which included providing a £150m package of support for employees, suppliers and others."

Any inquiry will focus on the controversial £6.5m loan sanctioned by ministers to pay wages at Longbridge for week at the start of the election when there was little chance of a venture with a Chinese car maker to save the business.

Letters, seen by The Daily Telegraph, in late March and early April show DTI officials were warned three times there was little chance of a deal with Shanghai Automotive Industry Corporation. Yet Patricia Hewitt, then trade and industry secretary, sanctioned the £6.5m.

The NAO investigation is in addition to a full-blown inquiry by DTI inspectors. MPs on the Commons trade and industry committee are also considering an investigation.

Yesterday, it emerged that the £6.5m was sanctioned even though the Price Waterhouse Coopers, MG Rover's administrator, also felt it was highly unlikely that MG Rover could be sold as a going concern.

David Willetts, shadow trade and industry secretary, said he had written to Sir John Bourne, head of the NAO. His letter said: "Despite being informed [of PWC's concern], the Government gave MG Rover a £6.5m loan in late April 2005 to keep the company going for a single week." Mr Willetts also sought assurances that public money "was not used for political purposes during the election campaign".

The news came as a tribunal awarded 5,000 former Rover workers £14m in redundancy wages. The Transport and General Workers Union fought the case on behalf of the workers, who had not received the eight weeks pay in lieu of notice they were legally due.